Red Hat: The first billion dollar Linux company has arrived

Red Hat: The first billion dollar Linux company has arrived

Summary: Red Hat didn't just break a billion dollars in annual earnings, it smashed its way pass a billion bucks with a fiscal year gross revenue of $1.13 billion, up 25% year-over-year.


Red Hat: The first billion dollar Linux company.

Red Hat: The first billion dollar Linux company.

Depending on how you look at these things, Red Hat has long been a billion dollar company. With a market cap of almost $10-billion dollars, Red Hat, the biggest of Linux companies, has long been open-source's shiniest success story. The gold standard of business success, though, is making a billion dollars in revenue in a single fiscal year and Red Hat has just pulled this feat off.

Red Hat didn't just creak the billion dollar mark though. It smashed its way through it. For the full fiscal year 2012, total revenue was $1.13 billion, an increase of 25% over the prior year. Subscription revenue from Red Hat Enterprise Linux (RHEL) was $965.6 million, up 25% year-over-year.

In the earnings call, Jim Whitehurst, Red Hat's President and CEO said. “Red Hat is the first pure-play, open source company, and one of only a select few software companies, to have achieved the billion dollar revenue milestone. The open-source technologies which we provide are being selected by more customers every day as they re-architect the infrastructure of their data centers for greater efficiency, agility and cloud enablement.”

Red Hat reported fourth quarter earnings of $36 million, or 18 cents a share, on revenue of $297 million, up 21 percent from a year ago. Non-GAAP earnings for Red Hat’s fourth quarter earnings were 29 cents a share. That handily beat Wall Street's estimates of fourth quarter earnings of 27 cents a share on revenue of $291.2 million. For fiscal 2012, Red Hat reported earnings of $146.6 million, or 75 cents a share, on revenue of $1.13 billion, up 25 percent from a year ago.

Looking ahead, Whitehurst sees companies and governments looking for more efficient, cost-effective technologies. They, in turn, are moving to Linux and open-source solutions because they can deliver programs and operating systems that meet these demands. Their existing customers are also happy with Red Hat. Whitehurst said 99 out of Red Hat's top 100 customers whose support contracts were due renewed their contracts.

No matter what aspect of Red Hat's business you looked at, Red Hat made money, “We experienced impressive breadth and depth of demand for our technologies this quarter whether by geography or by industry vertical. This resulted in record financial metrics for both the fourth quarter and the full fiscal year 2012,” said Charlie Peters, Red Hat's Executive Vice President and CFO during the earnings call. “Our strategy for growth, coupled with relentless day-to-day execution of the business, has been successful. We experienced a significant increase in large deals, both in Q4 and for the full year which contributed to annual organic growth of 25% in revenue, 33% in non-GAAP operating income and 35% growth in operating cash flow.”

Remember when people used to talk about how you couldn't make money from Linux and open-source software? About how you couldn't make money by “giving” things away? Recall, Bill Gates in 1999 saying "We think of Linux as a competitor in the student and hobbyist market but I really don't think in the commercial market we'll see it in any significant way." Funny, you don't hear much of that nonsense anymore.

Things should only continue to get better for Red Hat. According to IDC's latest server numbers, Linux is continuing to grow, while Windows and Unix decline. Peters expects Red Hat's revenue to grow 20% in the next fiscal year.

To quote Jim Zemlin, executive director of The Linux Foundation, “Since Linux has grown, so have the benefits Red Hat receives (and gives to others). When Facebook contributes code to make their data centers more efficient, Red Hat benefits; when Red Hat contributes code to improve file systems, mobile device makers benefit; when mobile device makers contribute code to improve power consumption, super computer cooling costs go down; when super computer users contribute code to make Linux faster, Wall St. benefits with faster trading systems -- and so on and so forth. So you can see that the positive feedback loop that is represented in the billions of figures above shows no signs of slowing down. Congratulations to Red Hat but also to all Linux users and ecosystem members who participate in this virtuous circle.”

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Topics: Linux, Open Source, Operating Systems, Software

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  • s/Linux/open source/g

    Not just a Linux company, an open source company.
  • The first billion dollar Linux company has arrived

    Great job Red Hat

  • Hat Tip to Red Hat

    Dietrich T. Schmitz *Your
    • Odd delineation

      At what point (how big of a corporation must they be) before you pull your heartfelt support for Red Hat and begin to consider them as evil for actually working for money? Linux is making them millions, just not the poor souls that wrote most of Linux itself. Software vs. Software Services seems like a thin line to walk. What happens when they are the keeper of a specific item of software/driver they build for their own use? Should the community have equal access? You see what I'm driving at. Please don't rewrite my questions to fit your answers.
      • I guess when they get to 90% market share

        And begin to take their monopoly (and customers) for granted.

        Did that really need to be explained to you? Or are you just slumming here?
      • Re: "poor souls that wrote most of Linux itself"

        >>>Linux is making them millions, just not the poor souls that wrote most of Linux itself.

        Forget that myth. Most of Linux is written by corporations:
        ... and other similar articles from "contribution to linux kernel" search results.

        BTW, RedHat is the biggest contributor among them.
      • Odd opposition

        Are you implying that working for money is evil? Red Hat sponsors Fedora, which benefits millions of other people directly or indirectly... Just because they found a way to help the community and make money at the same time, does that make them evil in your book? And would you like them more if they went out of existence trying to "give to the community"? But what good would that serve if they can't continue to help others because they went out of business being their brother's keeper?

        I suppose the worshippers of martyrs would then just sing some more praise of the glorious dead and move on to scorn another healthy business that they think is evil because it works for money.
  • Open Source has little to do with it

    Red Hat's main product is a proprietary service of supporting networks of Linux servers. It is this proprietary service that has allowed one company - and likely only one company that relies in part on Open Source in the future - to finally break through the Billion dollar revenue mark.

    If you think that this has anything to do with openness, Open Source, open standards, or open anything, etc., you are severely deluded.
    • You are correct

      Revenue will continue to climb as Red Hat continues to raise their service contract rates.

      What will happen to that revenue as other companies compete for contracts on Red Hat's software is the question that remains to be answered.
      Tim Cook
      • Not rate, marketshare

        you conveniently forget to mention that
        a. Redhat commits code back in a big way. Open.
        b. Only one? If you mean relying on open source, most pharma, financial, entertainment companies fall into this category.
        I think the deluded one is you.
    • if this is so

      Can you name this proprietary product?
    • Re: "Open Source has little to do with it"

      >>>If you think that this has anything to do with openness, Open Source, open standards, or open anything, etc., you are severely deluded.

      A simple test: google for "contribution to linux kernel" and name the company that contributes most.
  • The reason you do not see it is because you refuse to look

    [i]but I really dont think in the commercial market well see it in any significant way. Funny, you dont hear much of that nonsense anymore.[/i]

    And he is correct. What is Microsoft, Apple's and many other prorietary software companies annual revenue?

    Whith the many Linux based companies in the market, 1 company with a Billion in service contract revenue is pretty insignificant.
    Tim Cook
    • This is significant

      Red Hat the first pure Open Source and Linux vendor to top $1 Billion in revenues.
    • There it is in black & white

      [i]Red Hat the first pure Open Source and Linux vendor to top $1 Billion in revenues.[/i]

      What is it about that that you don't understand, faux pointy ears?

      Are you being dense or deliberately obtuse?
  • One Company?

    IBM hasn't made any money from Linux? Me thinks you're delusional like so many anti-Linux people.

    Red Hat...WINNING!!

    p.s. I started back in the late nineties with Red Hat Linux. A little rough but so was Slackware Linux.
    Arm A. Geddon
    • I thought IBM

      Like you I thought IBM claimed the billion dollar mark several years ago.
      • IBM isn't a open source company.

        There is no "IBM Linux distribution".

        I thought you could read.
      • IBM

        So as Microsift. So as Apple. So as Google.

        So what? Neither of them has ever been an open source company. RedHat has always been. And that's exactly what this article is about.
    • My Comment.

      My comment was in response to Mister Spock and not SJVN.
      Arm A. Geddon